Diplomat Specialty Pharmacy Enters New Era

Diplomat CEO discusses the company’s initial public offering and developing trends in the industry.

Diplomat Pharmacy, Inc, which is the nation’s largest independent specialty pharmacy, became a publicly traded company on the New York Stock Exchange on October, 10, 2014. The company announced the pricing of its initial public offering of 13,333,333 shares of common stock at a price of $13 per share. Specialty Pharmacy Times conducted an interview with Phil Hagerman, chairman and chief executive officer of Diplomat, to discuss the ramifications of the offering and other issues affecting the specialty pharmacy industry.

SPT: What does the public offering mean to Diplomat?

Hagerman: We’re incredibly excited to be traded on the New York Stock Exchange. We’ve been a private company for many years and have grown and built the structure privately for many years to really be a longstanding company. With what’s happening in specialty pharmacy, we see an industry that’s at an inflection point with trends around limited distribution drugs, with trends around a growing small biotech presence, with trends around the demand and requirement for transparency by health plans because of the cost of these new drugs. It’s a tremendous opportunity for Diplomat to step up now as a public, and therefore stronger and more transparent company on the New York Stock Exchange, to be able to continue our growth and fill some of the needs the industry is clamoring for.

For Diplomat this feels like a culmination for many of us of a lifetime of work. I’ve been at Diplomat for 39 years and yet it’s really the starting point for us. It’s a new chapter. We never forget where we started as we continued to grow, even as we became a billion and a half dollar company over the past few years, we never forgot there’s a patient on the end of everything we do. We don’t intend to change our behavior or our care value for patients just because we’ve become a public company.

SPT: What is your vision for what Diplomat will become in the future?

Hagerman: We think this is a great stake in the ground for Diplomat to continue to grow from, and if you think about it, there has not been a publicly traded specialty pharmacy since Accredo in 2005. So there is a tremendous appetite from the investor market to be able to invest in just specialty pharmacy, as opposed to in the past they had to add to a position around a PBM or a chain. We believe that’s going to create momentum and visibility for Diplomat, allowing us to continue on our path of offering new opportunities to health systems to work with pharmaceutical companies, and also opportunities around acquisitions that will be strengthened by our public balance sheet.

SPT: With the projected increases in the cost of specialty medications, how is Diplomat preparing for this spending growth?

Hagerman: What Diplomat has done as a differentiator has been, number one, we started as a small corner drug store and we have never forgotten that at the end of everything we do, there is a patient in need. Our model has been taking care of patients, one patient at a time. We continue to do that, even though we’re using technology and clinical capabilities at a level we think the industry probably has slipped away from a bit, and that’s how we’re improving care. We’re winning contracts and improving care around clinical capabilities, utilization management, and using those kind of tools to improve the cost curve.

SPT: How is Diplomat utilizing technology to improve patient care?

Hagerman: Data rules the day. When we use data and when we can capture data, it gives us the ability to work closely with pharmaceutical manufacturers so we can create clinical capabilities that help to get drugs at clinical trial efficacy. We use data and loop back with our managed care organizations around quality of life surveys. We use data with our physicians and labs to be able to adjust and manage care. So it’s a combination of the use of data technology, but it’s also a combination of new technology platforms combining with what Diplomat launched proprietary-wise a number of years ago. We also dip into expanding layered technology solutions so that we can communicate information back and forth seamlessly with all the stakeholders in the industry.

SPT: What developing trends in the industry do specialty pharmacies need to be aware of?

Hagerman: Specialty pharmacy as an industry is going to continue to be challenged. It’s a high dollar, low margin business. I think what specialty pharmacy needs to do, and what Diplomat is doing, is we need to continue to use technology to strengthen our value equation. We bring tremendous value to the sector, but historically technology has been somewhat weak and specialty pharmacy has not done a great job in the past of qualifying and quantifying the value we bring. Diplomat has made the investments in technology to be able to do that and we believe over the next few years we’re going to need to show that specialty pharmacy can help reduce the total cost of care. It’s not always about the cost of the drug, it’s about managing waste, improving outcomes, and the total cost of care.